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When Fry’s Electronics officially closed its Palo Alto site in December 2019, it left both a giant vacancy and a thorny zoning dilemma that continues to confuse city leaders.
For decades, the electronics store has occupied a location at 340 avenue du Portage that the city’s zoning code designates for housing. Due to the RM-30 zoning designation and unusually large plot size, the Housing element lists the site as a site with a realistic capacity of 221 homes.
Yet despite the underlying zoning, the city has for decades shied away from building housing on the Fry site. Worried about losing tax revenue generated by Fry’s, city council voted in 2006 to remove a zoning provision that would eventually have required housing on the site and agreed to allow Fry’s to operate as a “non-compliant use” “. Council also agreed in 2006 that the property must maintain the “non-conforming building use ratio” that existed at the time. And, confusingly, he limited on-site retail usage to 60,000 square feet, despite Fry’s occupying about 84,000 square feet of the larger campus that includes 3200 Park. Blvd., 340 Portage Road and part of Olive Avenue.
The city’s zoning laws also specify that a “non-compliant” designation is ceased if use is discontinued and not reinstated within a year – as is the case with Fry’s. As no retail outlet reoccupied the former Fry’s space, a new report Ministry of Planning and Development Services notes, “This part of the building can now only be occupied by RM-30 compliant land use.”
The 2006 decision set the stage for the dilemma: Now that Fry is no longer in the game, what should the city do for the rest of the tenants in the old cannery building? This question will come up again on Monday, as the board considers whether to require owner, The Sobrato Organization, to overhaul its leases to ensure that the mix – and proportion – of uses on the larger site remain the same as in 2006, even without the vacant position in place.
By virtue of the interpretation favored by the board of its last discussion on the subject, June 14, at least 41% of the site (minus the old Fry space) should be occupied by retail businesses, while 54% would be allocated to research and development and 5% to warehouses.
Sobrato, for his part, rebuffed the city’s determination that the retail space formerly occupied by Fry’s has been “discontinued” or “abandoned.” He cited his efforts to find a new commercial tenant, including his prolonged and ultimately unsuccessful negotiations with Target, which ended in September 2020.
Tim Steele, senior vice president of real estate at Sobrato, wrote in the letter that Sobrato has “remained diligent, active and continuous in our efforts to re-let vacant space during the COVID-19 pandemic, which created huge challenges and affected the retail business. even more than most other types of land use.
“We believe the facts and circumstances, particularly during the COVID-19 pandemic, confirm that there has been no drop-out or disruption,” Sobrato wrote.
Although the board took no formal action on June 14, board members and planning staff rejected Sobrato’s arguments that retail use has not been discontinued. Mayor Tom DuBois suggested during the meeting that it might be time to cushion non-conforming uses on the site and require compliance with the underlying RM-30 zoning. He highlighted the city’s regional housing allowance, which according to the latest regional housing needs assessment forces Palo Alto to plan more than 6,000 new homes between 2023 and 2031.
“It was suspended for Fry’s, which is no longer there,” DuBois said of the amortization schedule. “And we have this large RHNA allocation.”
Vice Mayor Pat Burt also said he supports reinstating depreciation, which would require Fry’s to phase out existing uses over a period of time so the site can revert to the underlying zoning. He highlighted the city’s larger planning effort for a 60-acre portion of the Ventura neighborhood, which includes the Portage Avenue property. Known as the North Ventura Coordinated Area Plan (NVCAP), the effort aims to bring new community amenities, including parks, shops and affordable housing to an area long considered underserved.
“I think it was a mistake the board made in 2006 to go from an extension (amortization) on a deliberate basis to a deletion,” Burt said. “We wouldn’t be in a position we’ve been in for the past two years if that had been the case, and the ability of all parties to come up with a consensus plan on NVCAP would have been facilitated by then. “
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